24 February 2011

Economists: Riddle Me This

The rough rule of thumb economists use is that a 10 per cent rise in the oil price equals half a percentage point off global growth.

I'm no economist, so I'm hoping that one will show up and explain to me how to reconcile this statement with oft-made claims that increasing the costs of energy (e.g., through a high carbon tax) will boost GDP, or less optimistically, reduce it imperceptibly. I am particularly interested in pointers to the academic literature. Thanks all!